So, how do you think we've gotten into this fine mess? Why would otherwise
intelligent investors carry so much more debt than they do savings? It's not
that people just don't bother to find out what an ARM means. There are
strong tax incentives to do the wrong things!

You'll pay ME to borrow?

It seems almost absurd that you get a government subsidy to mortgage a home.
I'm not talking about the numerous incentives for first-time buyers and other
gifts. Why in the world should the IRS provide a tax deduction for your home's
mortgage? Worse yet, why would a second mortgage on
your home qualify for a tax deduction?

For people in higher tax brackets especially, these government incentives
severely punish anyone who refuses them. A 5.00% mortgage looks more like a
3.00% mortgage after tax. When you're offered money at rates like that, it's
almost like a free loan.

You're taking away my meager savings interest!?

No, I'm determined to be a good citizen of the
world, and not borrow unnecessarily. I'm going to do
something "rainy-day" crazy and put my money in a savings account!
Now, the IRS is right there again to discourage any kind of
caution. Even though the most I can get for saving my money is something around
1.00%, they are going to step in and tax my meager return
at my marginal rate. So, if I'm careful enough to amass $10 worth of interest
for the year, Uncle Sam would like to take around a third of that away from me.
So much for savings!

No good deed goes unpunished.

So, is it any wonder that millions of us have huge mortgages, and almost no
savings? Hardly. We've simply done what we were incented to do. We have
tried to take advantage of the tax laws as we understand them. And now that
housing prices have decreased to the point where most of us owe more than our
homes are worth, it doesn't take much of a crisis to make us want to walk away
from that home. The banks are caught holding the bag, the government steps in to
save "too big to fail" banks, and we can look forward to funding the whole
bailout for the next few generations.

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